Reservations versus Planning and Projected availability calculation
Nice and interesting topic when it comes to planning, existing reservations and how projected inventory work together.
To start with, our NAV Supply Planning White Paper is clear:
…
The planning system does not include any reserved quantities in the calculation. For example, if a sales order has been totally or partially reserved against the quantity in inventory, the reserved quantity in inventory cannot be used to cover other demand. The planning system does not include this demand-supply set in its calculation.
However, the planning system will still include reserved quantities in the projected inventory profile because all quantities must be considered when determining both when the reorder point has been passed and how many to reorder to reach and not exceed the maximum inventory level. Consequently, unnecessary reservations will lead to increased risks that inventory levels run low because the planning logic does not detect reserved quantities.
…
I believe the first paragaph above is reasonable. Planning assumes demand is replenished for the reserved quantity and that reserved supply cannot be used for any other demand. Clear. Based on this, planning is not including the demand/supply set which is reserved one against the other. Any other portion of the demand (unreserved portion) which requires to be replenished is included into the planning calculation since we will require planning actions here.
Now, the missunderstanding comes with second paragraph.The projected inventory is used by the planning system to monitor the reorder point and to determine how much to reorder quantity when using Reordering Policy=”Maximum Qty.”. And, as said on second paragraph above, this includes reserved quantities. This projected inventory calculation is meaningful with reorder point when stock level is evaluated to determine if new replenishment is required. To determine this stock level all projected inventory is included … regardless if reserved or not. The stock will be there … so it needs to be considered. An example: assume we are using Reordering Policy= “Max. Quantity”. This means, most of the time, our warehouse has a maximum capacity that we cannot exceed. In other words, we cannot go above this maximum inventory level (maximum capacity) … so we need to include reserved quantities since that is truly using our warehouse capacity. That is why reserved quantities are included. Unnecessary reservation will lead to the fact that stock is there (ie. above the certain stock level) but it is reserved to another demand.
To summarize, if demand/supply are reserved, these will be respected in planning. And, if this is a reorder point item, reservations will be included into the projected inventory calculation which means it might disturb planning since might not be available.
